20/05/2024 10:15 AM


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PepsiCo sees snacking boost as lockdowns hammer soda sales

(Reuters) – PepsiCo (PEP.O) warned on Tuesday surging demand for Lays and Doritos would only partially offset a hit to business in the second quarter from coronavirus lockdowns that have shuttered restaurants, theaters and sports venues key for its soda sales.

FILE PHOTO: Pepsi products are displayed in a supermarket in New York City, U.S. February 15, 2017. REUTERS/Brendan McDermid

The company said it had seen an increase in consumers making breakfast and snacking during the day while stuck under stay-at-home orders, leading to a surge in sales of snacks, oatmeal and Aunt Jemima pancakes late in the first quarter.

Its drinks business, however, is not faring as well under the tough moves to stifle the virus, and the company ditched its full year forecast and predicted second-quarter organic sales would decline at a low single digit rate.

The warning mirrored that of rival Coca-Cola Co (KO.N), last week, which said volumes had fallen 25{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f} globally since the beginning of April, largely stemming from a loss of sales other than at retail stores.

PepsiCo finance chief Hugh Johnston stressed the group was less exposed than Coca-Cola to the part of the market hit the hardest by the lockdowns.

“Compared to our biggest competitor in beverages, they clearly have higher market share in away from home channels- restaurants, movie theaters and the like,” Johnston told Reuters.

Analysts at Jefferies estimate about 40{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f} of Coca-Cola’s volumes are sold through channels other than retail stores, compared with only about 10{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f} for Pepsi.

Still, demand for sodas at grocery stores is also starting to taper off after an initial phase of stockpiling at the beginning of the health crisis, Johnston said.

PepsiCo’s net revenue rose 7.7{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f} to $13.9 billion in the quarter ended March 21, beating analysts’ estimates of $13.21 billion, also helped by a massive advertising campaign during the Super Bowl. Organic sales of snacks under its Frito-Lay North America unit rose 7{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f} in the quarter.

Excluding one-time items, earned $1.07 per share, beating estimates of $1.03, according to Refinitiv IBES data.

PepsiCo also said it still expected to pay $5.5 billion in dividends and buy back shares worth $2 billion this fiscal year, signaling financial stability at a time when several blue-chip firms have suspended shareholder returns to preserve cash.

However, the company ditched its full year forecast over uncertainty related to the pandemic.

PepsiCo also announced a new North America distribution agreement with Bang Energy drinks on Tuesday, only a few weeks after striking a $3.85 billion deal to buy Rockstar Energy Beverages.

Reporting by Uday Sampath in Bengaluru; Editing by Patrick Graham and Tomasz Janowski

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